President Trump’s Terminations for Convenience: Know Your Rights
Two of President Donald J. Trump’s Executive Orders direct federal agencies to end their Diversity, Equity, Inclusion, and Accessibility (DEIA) programs.[1] As a result, agencies that contracted for DEIA services are now terminating those contracts for the government’s convenience.
Contractors facing the sudden termination of their contracts must know their rights. For example, Federal Acquisition Regulations (FAR) 52.249-1, 52.249-2, 52.249-4, 52.249-6, and 52.212-4(l) entitle contractors to recover a wide range of costs arising from terminations. These costs include: (1) labor, material, other-direct-costs, indirect expenses, and profit arising from performance of the contract prior to the contract’s termination; (2) termination-specific costs like severance, unexpired leases, and idle facilities; (3) subcontractor settlement costs approved by the government; and (4) direct costs and General & Administrative (G&A) expenses attributable to the termination settlement process itself. Reasonable legal and accounting costs incurred to prepare a settlement proposal are also recoverable.
Termination Settlement Proposals are drafted using government-provided standard forms and one of two cost-accounting methods: (1) an Inventory Basis methodology that tracks unit costs at a granular level (the government’s preference); and (2) a Total Cost Basis methodology, which does not break-down costs beyond their cost element––i.e., direct labor, indirect expenses, etc. Do not be misled by the standardized nature of these forms and the limited space they allow for cost explanations and justifications. This is your chance to tell your story, and we can help you draft a compelling narrative with supporting documentation that establishes your entitlement to the costs at issue. In addition, you may be able to recover the attorney fees you incur preparing your Termination Settlement Proposal.
Termination settlements are a core part of Cordatis LLP’s practice. Over the past four decades, we’ve helped dozens of clients––from small businesses to Fortune 500 companies––recover tens of millions of dollars in termination costs. Please contact Josh Schnell, Daniel Strouse, or Sam Van Kopp for assistance with issues related to the government’s termination of your contract.
[1] Ending Radical and Wasteful Government DEI Programs and Preferencing (January 21, 2025) and Ending Illegal Discrimination and Restoring Merit-Based Opportunity (January 20, 2025).
